2017-12-04

Book Review: "Narconomics" by Tom Wainwright

I've recently read the book Narconomics by Tom Wainwright. It's an exposition into the economics of Latin American drug cartels, looking at them as businesses rather than mysterious criminal entities. In particular, it considers the competition versus monopolistic/monopsonistic behavior on the demand- & supply-sides, issues of global operations and outsourcing, diversification in products, cartel hierarchies versus franchising, public relations versus employee incompetence, and so on. Of course, as the drugs discussed in this book are illegal for the most part, there are other issues of dealing with the police and the government, whether through hiding, bribery, or warfare, and with enforcing things like non-compete agreements and franchise territories through violent means in the absence of legal recognition (where a court system could otherwise peacefully mediate such disputes). The aim of this book is to step back from the emotionally charged rhetoric of the "war on drugs" by seeing them in terms similar to legitimate businesses, and in doing so defeat the scourges of the illegal drug trade in the long-run through economically-minded legislation rather than ineffective brute force.

The book is not too long, quite accessible, well-written, and engaging to anyone with a high school-level understanding of microeconomics and an interest in issues surrounding illegal drugs. There are a few issues I have with the book though. One is that while the focus is clearly on Latin America, I would have liked to see at least some parallel discussion about the flow of drugs from Central/South Asia (particularly Afghanistan) to Europe and the economics therein, as that is mentioned a few times without further details. Another is that the last numbered chapter discusses legalization exclusively in the context of marijuana/cannabis, even though there is a discussion about the much narrower margin between safe and fatal doses for other drugs (especially heroin) compared to cannabis, which then raises questions about whether the legalization of marijuana is really meant to be a model for legalization/regulation of other currently illegal harder drugs; the epilogue addresses this point adequately with more nuance, but the structure of the final chapter still seems subpar for that reason. Finally, my biggest issue regards the discussions of how the operations of drug cartels in Latin America are influenced by how they can compete with the governmental "monopoly" on force due to unresponsive, complicit, corrupt, or ineffectual governments, and how cartels can compete with other economic opportunities through wages, protection, and other benefits. In particular, my concern is that the book acknowledges how legalization of drugs often economically incentivizes supply-side consolidation (as being outlawed necessarily limits how large drug operations can grow before attracting government attention), but in conjunction with other trends like offshoring of drug production too, it isn't clear how people in poorer Central American countries will further benefit; while the reduction in violence that would almost surely accompany restricted legalization of drugs is certainly a laudable goal, it is unclear whether the resulting economic opportunities, given the continuing poor governance and paucity of other good economic opportunities there, will really work to better the lives of those people, or whether the situation will devolve into large drug companies bullying small countries as in the banana republics of several decades ago (as discussed in the book) or tobacco or fast food companies doing the same to such countries today. In light of that, while the suggestions made in the book for improving outcomes of drug policy do seem like they would certainly help to some extent, I can't help but feel that the title of the epilogue, that economists make the best police officers, smacks of hubris. Apart from those issues, I'd recommend this to anyone interested in the subject.

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